Hopes for additional Chinese stimulus have been dashed as China’s latest economic package aligned with market estimates, but left investors wanting more substantial support in light of Donald Trump’s re-election and possible trade tensions.
China introduced a five-year stimulus package worth 10 trillion yuan (A$2.11 trillion) on Friday to address the escalating local government debt, aiming to reduce fiscal strain and enhance economic resilience.
Finance Minister Lan Fo’an announced the plan on Friday, highlighting Beijing's intention to leverage available deficit space in the coming years for further economic support.
However, with Trump’s recent election win raising concerns over renewed Sino-U.S. tariffs, investors had hoped for a larger fiscal boost to mitigate future trade impacts.
However, markets expect that Beijing will need to do more to bolster consumer confidence and address the downturn in property markets to meet its 5% growth target.
Trump’s planned 60% tariffs on Chinese goods could also present a major challenge for China, adding urgency to domestic economic support measures.
China’s authorities have been increasingly active in recent months, implementing rate cuts and real estate relief measures and recently launching an 800 billion yuan ($1.69 billion) stock market rescue package.
With the NPC’s latest measures now in place, investors are preparing for a potential Trump-led U.S. administration’s impact on China’s economy.
Trump’s aggressive tariff proposals have so far been perceived as negotiable, with China better positioned to withstand trade restrictions than eight years ago.
Moreover, some investors see Trump’s “America First” agenda as an opportunity for China to strengthen its global position, especially if U.S. policies also target allies in Europe and Asia.
While the NPC’s stimulus package fell short of investor hopes, China’s strategy for balancing domestic growth and potential U.S. trade tensions will be closely watched in the coming months.